Resilient Japanese Manufacturing: A Final Surge Before the Clash

Recent economic data from Japan indicates a notable evolution in its manufacturing industry, with industrial production posting its fastest growth in 12 years and new orders rising at their sharpest pace since 2022. This robust trend, driven mainly by demand for semiconductors and AI-related products from Asia and the United States, shows that Japan is leading global recovery. However, this productive strength comes with a cost: capacity pressures are intensifying, with backlog of work rising at their fastest rate in over a decade and input cost inflation remaining sharply elevated due to the Middle East conflict's impact on oil and raw material prices. These factors contribute to increased upward pressure on Japanese inflation, which is keeping policy discussions focused on potential BoJ rate adjustments. Additionally, this situation bolsters the narrative of joint currency intervention efforts potentially yielding results. Nevertheless, it’s crucial to note that challenges persist with input costs still high and exports rising, driving up domestic inflation pressures. Source original: ForexLive (InvestingLive).